It is conceded on all hands that the extant system of monitoring high value transactions through Annual Information Return (AIR) is better and more meaningful than the economic criteria scheme for mandatory filing of income-tax returns. AIR is an excellent smoking-out regime. It calls upon recipients of high amounts or registrars of high value transactions to notify the Income-Tax Department.
As it is, the registrar registering immovable properties have to notify the Department if the transaction value is Rs 30 lakh or more; the Reserve Bank of India and companies have to notify if anyone subscribed to bonds for more than Rs 5 lakh during a year; companies have to notify the names of persons putting in more than Rs 1 lakh as subscription amount in an IPO or FPO; mutual funds if they mobilise more than Rs 2 lakh as subscription from a person and banks if a person has during the year made payments upwards of Rs 2 lakh through its credit cards or deposited more than Rs 10 lakh in cash into his savings account with the bank. All these are required to be notified at the end of the year.
And for good measure, the person who are under surveillance, as it were, are also obliged to disclose all these details in their tax returns. The idea is the two have to jell — the one reported by those coming into contact with high value transactions and the one reported by those indulging in them.
The extinct economic criteria scheme should have been dovetailed with the extant AIR. Those taking wings abroad were earlier required to file their returns no matter what their income was. One wishes airline companies were brought into the AIR loop. The airlines flying abroad must be mandated to maintain a unified database that captures the cumulative flying details with anyone spending more than say Rs 5 lakh during a year under surveillance. It is common knowledge that there is a lot of flight of capital from the country to tax havens and secretive destinations and those who send their ill-gotten money abroad soon follow up with several visits to these destinations for withdrawal or investment purposes.
Make it comprehensive
Tax sleuths can swoop down on them and hold them to account. The AIR in fact can be made more comprehensive. There are umpteen number of NBFCs where huge deposits are placed. They too should be obliged to report to the department vide AIR high value deposits. Jewellery shops do brisk business in this country. Many of them do transactions in cash for staggering sums . Decoy tax sleuths would do well to keep tabs on jewellers. In any case they must be mandated to maintain accounting and biometric details of purchasers so that annual purchases beyond the specified threshold, especially in cash, are reported to the department. Swanky cars also beckon those with unaccounted and ill-gotten wealth. There is no reason why the registration authorities cannot be mandated to report registration of swanky cars with the cut-off point being say more than Rs 10 lakh.
The best way to prevent black money is intelligent use of information, with aggression being the last resort.
(The author is a Delhi-based chartered accountant).